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Employee ownership (and worker control)

Not including outright cooperativism.

Codetermination

Notable examples

  • Certified Employee-Owned - “a certification program for employee-owned companies”
  • Gallatin, Albert. The treasury secretary for Madison and Jefferson apparently instituted profit-sharing at his glass-making factory and said, in 1795, “The democratic principle upon which this Nation was founded should not be restricted to the political processes but should be applied to the industrial operation.” Source unknown.
  • Publix
  • Winco - majority employee-owned American supermarket chain

Policy

Chronology

  • 1974: Based on the ideas of Louis Kelso, Sen. Russell Long added sections in the Employee Retirement Income Security Act that defined ESOPs and granted tax advantages, especially for private companies. Rather than buying company stock with wages, the program provisioned for grants of stock as a means of self-financing
  • 1978: Carter-era IRS modification allowed 401(k) retirement plans for companies, making ESOPs less attractive
  • 1984: Sen. Long and President Reagan altered incentives in the Tax Reform Act to make the incentives attractive for publicly traded corporations to adopt 5-20% employee ownership
  • 1984-1997: Amendments to IRS code section 1042 added incentives for private businesses to switch to >30% employee ownership
  • HW Bush eliminated tax incentives for ESOPs in publicly traded companies
  • Clinton incentivized profit-sharing among executives while reducing ESOP incentives
  • W. Bush cut incentives for broad-based stock options
  • Obama administration often called for reducing ESOP tax incentives
  • 2016 Democratic Party platform: “Corporate profits are at near-record highs, but workers have not shared through rising wages. Profit-sharing is linked to higher pay and productivity. That is why, working with business, labor, and other stakeholders, we will incentivize companies to share profits with their employees on top of wages and pay increases, while targeting the workers and businesses that need profit-sharing the most.”
  • 2016 Republican Party platform: “Republicans believe that the employer-employee relationship of the future will be built upon employee empowerment and workplace flexibility. We therefore endorse employee stock ownership plans that enable workers to become capitalists, expand the realm of private property, and energize a free enterprise economy.”

Bibliography

Technology companies

  • D&H Distributing - “ a leading technology distributor of IT and electronics offering end-to-end solutions for today's reseller and retailer and the clients they serve across the SMB and Consumer markets,” at least partially employee owned
  • Huawei - apparently worker-owned telecom hardware maker
    • Official “corporate information”:
      • “Headquartered in Shenzhen, China, Huawei is a 100 percent employee-owned private company. We have offices and research facilities in 100 nations spanning every continent.”
    • Working conditions
    • De Cremer, David and Tian Tao. “Huawei: A Case Study of When Profit Sharing Works.” Harvard Business Review. September 24, 2015.
      • “Some U.S. lawmakers consider the company a security threat. For its part, Huawei’s internal policy is to use U.S. law as the guiding law in their international business”
      • “At Huawei’s inception, Zhengfei designed the Employee Stock Ownership Plan (ESOP). At the time, Zhengfei had no idea what a stock option system was – not being familiar at that time with the types of incentives systems developed in the West. Around that time, China was still struggling with the aftermath of the Cultural Revolution and being a private owner and thus capitalist was still perceived by many as an ugly thing. In light of that reality, Zhengfei felt that not owning the company was also the least dangerous thing for a founder to do.”
      • “Today, Zhengfei himself holds only 1.4% of the company’s total share capital, with 82,471 employees holding the rest (as stated in Huawei’s 2014 Annual report, as of December 31, 2014).”
      • “To be specific, the sum of employees’ salaries, bonuses and dividends is 2.8 times the company’s annual net profit, and plans are to further increase the ratio to 3:1.”
      • “due to legal constraints, non-Chinese employees are not able to participate in the ESOP, despite many of them having expressed a desire to be included. To meet these demands, Huawei has recently adopted a long-term incentive plan called Time-based Unit Plan (TUP). First piloted in 2014, TUP is a profit-sharing and bonus plan based on employee performance for all eligible employees (“recipients”). Under TUP, time-based units (“TBUs”) are granted to the recipients, which entitle the recipients to receive cash incentive calculated based on the annual profit-sharing amount and the cumulative end-of-term gain amount.”
    • Fortune editors. “What makes China telecom Huawei so scary?.” Fortune. July 28, 2011.
      • “success in the world’s biggest telecom market, the U.S., has been hard to come by. Despite bidding again and again since it first entered America a decade ago, the company has yet to win a single big contract from the top-tier U.S. carriers”
      • “Several members of Congress, joined by Gary Locke, the U.S. Commerce Secretary soon headed to Beijing as the next U.S. ambassador, have lobbied hard against Huawei.”
      • “Particularly vexing for Huawei is the suggestion that the company could be used to spy on behalf of the government in Beijing. Unverified assertions that the company is 'linked' to the Chinese military appear regularly in news articles.”—“Huawei’s media-shy founder and CEO, Ren Zhengfei, once served in the People’s Liberation Army as a telecom technician, and that the company (like AT&T, Sprint, and Verizon in the U.S.) is a military and government contractor in its home country”
      • “Huawei argues that it has no ties to the Chinese government. As Plummer likes to point out, the company is headquartered in Shenzhen, across the border from Hong Kong and far from Beijing. Huawei derives just 36% of its revenue inside China. The government has never taken any ownership stake, says Huawei, and the company is 100% employee-owned”
    • Saarinen, Juha. “Who really owns Huawei?.” iTnews. May 28, 2010.
      • “While no direct ties between Huawei and the Chinese military and Communist Party have ever been established beyond CEO Ren Zhengfei's past ties to both”—“Zhengfei is content with a mere 1.42 percent of shares in Huawei. / The rest - some 98.56 per cent - is owned by employees, according to the company.”
      • A “convoluted” structure: “Huawei employees own both the company they work for, and the company that owns Huawei itself.”
      • “Employees cannot buy shares, but are instead allocated shares annually on the basis of work performance, duties and capabilities for the position and on future development potential.”
      • “Only Chinese employees are allocated shares in Huawei,” apparently because of legal limitations.
      • “Judging from the present list of board members, they are highly ranked executives rather than shop floor employees.”
      • Emphasizes the opacity of the system, which does not allow for employee involvement in governance. “the 'employee-owned' structure appears to be an attempt at distancing Huawei from its PLA (People's Liberation Army) roots.”
    • NOBL
    • Tejada, Carlos. “The Search for Clarity on a Key Question: Who Owns Huawei?.” Wall Street Journal. January 15, 2014.

Bibliography